Mt. Gox founder refuses to face U.S. bitcoin judge

KatyStech

Mt. Gox founder Mark Karpelès said he would not come to the U.S. later this week judge to answer questions about the Japanese bitcoin exchange's U.S. bankruptcy case, Mt. Gox lawyers told a federal judge on Monday.

Mt. Gox's bankruptcy lawyers said that Mr. Karpelès is "not willing to travel to the U.S.," despite an order from Bankruptcy Judge Stacey Jernigan for him to answer questions under oath on Thursday from lawyers who represent customers with frozen bitcoin accounts.

In court papers, Mr. Karpelès's lawyers blamed a conflict: he recently received a subpoena to appear on Friday in front of the U.S. Department of Treasury's Financial Crimes Enforcement Network, an anti-money-laundering division. The division has closely watched virtual currencies like bitcoin and issued guidance on them about a year ago.

Mr. Karpelès' lawyer said the subpoena from Treasury officials "did not specify topics for discussion."

"Until such time as counsel is retained and has an opportunity to 'get up to speed' and advise Mr. Karpelès [on the Treasury subpoena], he is not willing to travel to the U.S.," lawyers for Mt. Gox said in documents filed in U.S. Bankruptcy Court in Dallas. They asked Judge Jernigan to push back questioning to May 5.

A Treasury spokesman declined to comment.

Mr. Karpelès hasn't been charged with a crime. Last year, special agents from the Department of Homeland Security seized more than $5.1 million from accounts belonging to Mt. Gox under a federal money laundering statute. According to the statute, violators can be punished with fines, imprisonment or both.

Mr. Karpelès lives in Japan, where administrators for the company's Japanese bankruptcy case are looking for some of the roughly 550,000 bitcoins that the company lost earlier this year. During a U.S. Bankruptcy Court hearing earlier this month, Judge Jernigan said that Mr. Karpelès "has made himself a fact witness by signing [court papers and] by holding himself out to this court and the world as the...CEO or sole officer of Mt. Gox."

Mr. Karpelès also controls a Japanese entity that owns 88% of Mt. Gox, according to court papers.

Mt. Gox, once the world's most popular bitcoin exchange, suspended trading Feb. 25 after announcing the disappearance of the digital currency. The loss of 7% of the world's bitcoins, valued at $473 million at the time, may have been caused by a "bug in the bitcoin software algorithm, which was exploited by one or more persons who hacked the bitcoin network," Mt. Gox's lawyers said in court papers.

In court papers, lawyers for Mt. Gox customers have been trying to round up U.S. residents who paid a fee to Mt. Gox to buy, sell or trade bitcoin, for a potential class-action lawsuit.

Buyers and sellers of bitcoin, a virtual currency created in 2009 that some merchants have begun to accept as payment, have used Mt. Gox since 2011. In all, Mt. Gox has 127,000 customers, according to court papers.

After filing for bankruptcy in Japan, Mt. Gox filed for Chapter 15 bankruptcy protection in Texas to stop customers who sued it in Illinois from targeting the cash it is holding in U.S. bank accounts.

It is unclear how Mr. Karpelès's decision could affect the U.S. bankruptcy case, which hasn't yet secured an official nod from a judge. In Chapter 15 bankruptcy cases, company officials have to prove that a legitimate reorganization is taking place in a foreign country before a company's U.S. assets get protection from seizure.

Judge Jernigan set that hearing for May 20. Meanwhile, the company is expected in a Japanese court on Tuesday.

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